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Southstar Equipment: Strategies to build an innovation-focused company

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A sharp focus on product innovation has helped Southstar Equipment Ltd. take on multinationals in its niche in the logging equipment industry, generating outstanding growth and export opportunities.

Its innovation success is an example for other Canadian small businesses looking to compete and win in today’s competitive global economy.

Outstanding growth profile

The 18-person Southstar makes log processing machines in Kamloops, B.C. The machines strip branches and bark from harvested trees. It posted sales of about $11 million in 2013—up from $5 million in 2011, the year the company was launched by forestry equipment industry veterans Marcel Payeur and Michael Klopp, and a group of partners.

Here are the three key innovation-focused tactics the company has used to help propel its rapid growth.

1. Conduct indepth market research

Payeur and his partners understood that existing log harvesting equipment either couldn’t handle both large and small trees, or couldn’t process multiple harvested trees at the same time. They sensed there was a market opportunity, but made sure by conducting extensive market research.

The team listened to prospective customers and learned. Southstar’s local logging industry contacts told them that, depending on the type of trees being harvested, they needed to use an assortment of processing machines, each of which cost $200,000 or more.

“The loggers also told us they wanted to lower their operating costs by reducing the need for repairs,” Payeur recalls. “So, we thought about how we could cut costs for the end user and build a product that would last longer.”

2. Swing into action quickly

Southstar spent just three months experimenting and tinkering with designs before producing a processor. It allowed loggers to double production while enjoying 20% longer durability in the field than other comparable products on the market, Payeur says.

3. Keep innovating

Southstar has kept up its fast pace of innovation by rolling out three new processor models since 2011. Payeur and his partners work to stay ahead of industry developments and close to customers.

At a recent show in Chile, for example, Payeur drew the interest of local logging executives by highlighting Southstar’s ability to process several logs at the same time, a feature that’s suited to the needs of loggers in South America.

South Africa and Brazil are Southstar’s next export targets. “They need to de-bark eucalyptus, so we’re making changes to our equipment to meet that need,” Payeur explains.

Payeur’s advice is simple for other entrepreneurs who want to go up against large competitors.

“Keep your business structure as nimble as possible, keep developing new products, and be prepared to react quickly to market demand.”

Lessons learned

Southstar Equipment partners Marcel Payeur and Michael Klopp share 5 lessons they’ve learned while building their business.

  1. Conduct comprehensive market research to develop products your customers actually need.
  2. React quickly to developments in your market.
  3. “Make sure you have a lot of financial backing with an organization like BDC that will pay attention to you,” Payeur says. “There were a few times that if we didn’t have BDC, we would have been finished.”
  4. Focus on exceptional service as a tool to ensure customer satisfaction and help drive word-of-mouth sales through referrals.
  5. “Build a good team by hiring carefully,” Klopp says. “We’re doing more with fewer employees than our largest competitor.”

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